Roth
Father dies with a Roth IRA going to his son
Will the son be taxed on the Roth since he is the primary Bene?
Just inheritance tax and ordinary income tax?
Father dies with a Roth IRA going to his son
Will the son be taxed on the Roth since he is the primary Bene?
Just inheritance tax and ordinary income tax?
Permalink Submitted by Alan - IRA critic on Sat, 2014-02-15 17:32
Once 5 years has passed since the year of father’s first contribution, the Roth is entirely tax free, but son will have to take out annual RMDs beginning in the year following father’s death. And even before the 5 years has passed if son does not exceed the annual RMDs the distributions should be tax free. Inheritance tax depends on the state father lived in and the size of his estate but no inheritance tax is due from the beneficiary in the vast majority of cases.
Permalink Submitted by hank suskiewicz on Sat, 2014-02-15 18:12
If the money is tax free to the son, why is RMD’s required?The Roth was opened over 10 yrs ago, so there would be no tax, but I thought inheritance tax would have to be paid. This is in Pennsylvania.
Permalink Submitted by Alan - IRA critic on Sat, 2014-02-15 21:35
In PA I imagine inheritance taxes will be due. Rate 4.5%? RMD is due for a non spouse beneficiary as apparently Congress did not want non spouses to achieve unlimited tax free gains in the Roth. The main purpose of retirement accounts is to fund the retirement of the owner or surviving spouse, not that of non spouse beneficiaries.